What are Boundary Options & How can you maximize your profitability by trading boundary options?
A boundary option gives investors the ability to trade based on the underlying assets closing price by expiration time.
You can either choose in bounds or out of bounds.
The tricky and difficult aspect of boundary options are the constantly changing price range. A trader needs to really study the spread, as it changes based on an algorithm that adjusts to market volatility.
Notice in this picture below, the spread on the AUD/USD pair.
Boundary Options Strategy
While most traders assume that boundary options are the simplest way to go both ways, the real money is during low volatility times of day.
I thought about placing a trade on the Euro US Dollar Forex pair before the FOMC makes their interest rate announcement, but the brokers do not list options during that time.
I thought about buying the “Out” options on Oil before the weekly inventories data is released every Wednesday. Again, the brokers did not list the options at that time.
So then I graduated from being a naive newbie trader, and realized that there are plenty of times during market hours when currencies in specific are quiet. Thing about the lunch time hour in New York. Markets are quiet between 11:30 am and 1:00 pm.
How about opening a position for the Euro to stay in the range during that time.
Boundary Options Brokers
Some of the popular binary options brokers offer boundary options.
Newbie Tip: Boundary options are referred to as Range options by many veteran traders.